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Russell Rhoads, CFA

Russell Rhoads, CFA, is Director, Product Advancement, Global Derivatives at Cboe Global Markets. His career before joining Cboe included positions at a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, Balyasny Asset Management, and Millennium Management. He is a financial author and editor having contributed to multiple magazines and edited several books for Wiley publishing. He is the author of six market related books including Trading VIX Derivatives, Option Spread Trading, Trading Weekly Options, and Options Strategies for Advisors and Institutions. He authored material to be included in Level II of the CFA program and material for the CMT designation. In addition to his duties at Cboe, he is an adjunct instructor at Loyola University. He is a double graduate of the University of Memphis with a BBA ('92) and an MS ('94) in Finance and also received a Master's Certificate in Financial Engineering from the Illinois Tech in 2003. Russell is currently pursuing a PhD from Oklahoma State University with an expected graduation date in the Summer of 2018.

I considered skipping the first chart in this blog since the four S&P 500 related volatility indexes didn't move much last week. The only thing to note here is that the shorter dated end did rise a bit more than the long end, but the curve remains fairly steep.
Despite the fairly quiet week, VVIX rose to the mid-90's. I'm hearing a mix of reasons which fall into two camps. One - with steep contango put buyers are coming into the market to take advantage of the futures[...]

VIX was higher last week, but on the chart and table below that’s all that moved up. The entire curve was lower as the steep contango that everyone has been talking about got a little less steep.
On Friday, the biggest VIX option trade appears to be expecting VIX to rally sometime in the next few weeks and take the September futures with it. With spot VIX around 11.50 and the September VIX futures around 15.00 someone came in and purchased the VIX Sep 17 Calls for 1.24[...]

The race between large cap and small cap stocks came down to a photo finish last week as the Russell 1000 (RUI) was up 0.06% while the Russell 2000 (RUT) ended up losing 0.13%. This slight win for RUI didn’t do much as far as the year to date performance comparison goes as RUT is still ahead of RUI by 1.4% as RUT is up 8.27% in 2016 while RUI is up only 6.87%.
The CBOE Russell 2000 Volatility Index (RVX) was lower last week while VIX gained a little. The result when[...]

Next week we start to reach the end of a pretty uneventful earnings season. The week is dominated by retailers which is always a signal that earnings season is coming to a close. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.

VIX was down 4% last week and is currently hovering around two year lows. This is not exactly what many volatility observers were expecting for 2016 (including the author). VIX has been at pretty low levels for a couple of weeks and since there’s been no real spike VIX futures are finally working lower.
Friday was the one-year anniversary of the first VIX Weeklys Futures settlement. On August 5th last year the first VIX Weeklys Futures contracts settled on the open at 12.16. Apparently[...]

The list is starting to shrink as we get toward the end of earnings season. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.

When S&P 500 implied volatility is already low there’s not much room for a further drop. That was the case going into this past week and as seen below with the S&P 500 climbing all four of the S&P 500 related volatility indexes were lower, but not by much.
VVIX in the mid 80’s remains high, but believe it or not that may reflect VIX Put buying instead of VIX Call purchasing. Demand for puts on any VIX strength or to take advantage of steep contango[...]

Last night we were (somewhat) entertained by the opening ceremonies for the Summer Olympics and for the next 17 days will be subjected to story enhanced competitions. I have been monitoring a competitive struggle already this year. The battle between small cap and large cap stocks. It has been like a marathon with the Russell 2000 (RUT) falling way back, but pacing itself relative to the Russell 1000 (RUI). RUI had quite a lead after the first six weeks or so of 2016. [...]

The CBOE Options Institute is hosting the first in a series of classes that will focus on different aspects of option and volatility trading. The first class, appropriately named Focus on VIX and Volatility Products, will be held on Friday August 19th at CBOE. For those unable to make it to Chicago the class is also available online. Specific topics to be covered include
VIX and the behavior of volatility indexes
VIX futures and options price behavior
Trading VIX related Exchange Traded Products
Long,[...]

It was as quiet a week as I can remember with respect to the S&P 500 focused volatility indexes. An quieter and the lines below would look like a single line.
The long ETPs really suffered last week as we entered the week in very steep contango when comparing VIX with the August and September futures. Of course what is bad for VXX is good for XIV and SVXY which both rose over 9% and up over 30% on the year. VVIX actually rose a tad last week as well as VIX option[...]

Next week is another huge week for earnings. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.

Today is the 73rd birthday for Rolling Stones front man Sir Michael Philip ‘Mick’ Jagger. His accomplishments would take up more space that I have available in this posting, but the statement, “one of the most dominant cultural figures of our time” about sums it up. One of my favorite Rolling Stones songs is “Time Is on My Side” which I believe is a great statement with respect to potential success trading options. I always think of that song[...]

VIX was the biggest mover among the four S&P 500 related volatility indexes this past week. VIX dropped more than 5% while VXST lost 0.39% and VXV was down 1.19%. Longer dated volatility actually rose last week with VXMT gaining 0.28%. The curve remains very steep which I’m taking as uncertainty abounding with respect to the balance of 2016, especial the fourth quarter of 2016.
Most the data points on the table below are as one would expect after a relatively[...]

Last week VIX broke the 12 level, which surprised some market participants who felt 2016 was going to be a roller coaster ride that kept VIX at elevated levels. I have already spent time on the Wall of Shame as I count as someone who felt VIX was spend more time around 20 than it has in several years this year.
Do note on the term structure chart below that the shape of the curve is steep. Those of us grasping at straws with respect to elevated volatility see that as a glimmer of hope[...]

Last week the performance for the Russell 1000 (RUI) and Russell 2000 (RUT) was as close as I’ve seen it since I’ve been doing these blogs. RUI gained 0.67% and RUT was higher by 0.65% for what we will say is within the margin of error (I’m stealing from the political polls). For the year RUT is maintaining a small lead on RUI up 6.78% versus 6.40%. This is the second week in a row with RUT in the lead which is pretty impressive considering back in February RUT[...]

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